Q3 2022 RadNet Inc Earnings Call
Thank you for standing by your on hold for the Radnet, Inc. Third quarter 2022 financial results call. At this time, we're gathering additional participants and should be underway. Shortly we appreciate your patience and ask that you continue to hold.
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Thank you for standing by your on hold for the Radnet, Inc. Third quarter 2022 financial results Conference call. At this time, we're gathering additional important additional participants and should be underway. Shortly we appreciate your patience and ask that you continue to hold.
[music].
Please standby were about to begin.
Good day and welcome to the Radnet, Inc. Third quarter 2022 financial results Conference call. Today's call is being recorded at this time I'd like to turn the call over to Mr. Mark Stolper Executive Vice President and Chief Financial Officer of Radnet, Inc. Please go ahead.
Thank you.
Good morning, ladies and gentlemen, and thank you for joining Dr. Howard Berger and me today to discuss Radnet third quarter 2022 financial results.
Before we begin today, we'd like to remind everyone of the safe Harbor statement under the private Securities Litigation Reform Act of 1995.
This presentation contains forward looking statements within the meaning of the U S. Private Securities Litigation Reform Act of 1995.
Typically statements concerning anticipated future financial and operating performance right and its ability to continue to grow the business by generating patient referrals and contracts with radiology practices recruiting and retaining technologists, receiving third party reimbursement for diagnostic imaging services.
Successfully integrating acquired operations generating revenue and adjusted EBITDA for the acquired operations as estimated among others are forward looking statements within the meaning of the safe Harbor.
Forward looking statements are based on management's current preliminary expectations and are subject to risks and uncertainties, which may cause radnet actual results to differ materially from the statements contained herein.
These risks and uncertainties include those risks set forth in Radnet reports filed with the SEC from time to time, including Radnet Annual report on Form 10-K for the year ended December 31 2021.
Undue reliance should not be placed on forward looking statements, especially guidance on future financial performance, which speaks only as of the date. It is made right.
Radnet undertakes no obligation to update publicly any forward looking statements to reflect new information events or circumstances. After the date they were made or to reflect the occurrence of unanticipated events.
And with that I'd like to turn the call over to Dr. Berger.
Yeah.
Thank you Mark good morning, everyone and thank you for joining us today.
On today's call Mark and I plan to provide you with highlights from our third quarter 2022 results give you more insight into factors, which affected this performance and discuss our future strategy. After our prepared remarks, we will open the call to your questions I'd like to thank all of you for your interest in our company I forget a getting a portion of your day.
To participate in that.
Our conference call.
I would like to say on behalf of myself and the entire team at Radnet. We hope all of you and your loved ones are healthy and staying safe.
During the third quarter revenue from imaging centers reporting unit increased five 2% aggregate procedural volumes increased five 7%.
Same store same center procedural volumes increased three 9%. This performance would have been substantially better but for staffing shortages you have forgotten it.
It's from both utilizing the capacity we have in our facilities and expanding hours to service. The growing demand. We are experiencing we believe the strong demand for imaging services is being driven by increasing efforts from pay ours to direct procedural volumes outside hospitals into ambulatory appreciate.
Imaging centers.
During the quarter, we were forced to utilize expensive temporary labor and absorbed extraordinary amounts of overtime charges, which impacted our EBITDA profitability and operating margins, although we anticipated.
Increased salaries benefits and wages in our initial guidance labor market has been more challenging.
We originally projected.
More recently, we are seeing signs of improvement in the labor market in the last couple of months.
We have been more affected in filling open positions in September our number of open positions peaked at 850.
Representing almost 10% of the entire workforce. The latest support I have received in November is at our open positions have fallen to 262 positions.
Additionally, the COVID-19 impact on our work force, which privilege hurt our ability to staff our centers appropriately are substantially abated.
Furthermore, we believe staffing shortages will continue to improve.
We are noting that many large companies, including the likes of Amazon Walmart.
Twitter matter just to name a few and certain large hospital systems have recently announced staffing reductions.
The demand for our services is strong and growing we are experiencing increasing patient volumes and virtually all of our regional markets October was the strongest revenue months, we've experienced all year and the start to know Denver appears to be equally robust as a result, we are anticipating improved.
Fourth quarter performance, which we believe will continue as we move into 2023.
We are focused on executing key companywide initiatives I'm going to briefly review some of these initiatives before I turn the call back over to Mark.
First as we have discussed throughout the year, we have been in development at 15 de novo facilities spanning almost all of our markets.
Three of these facilities are now open.
And another eight facilities should be producing revenue by the end of the second quarter of next year.
Well de novo facilities have not been a big part of our historical growth strategy. Many of the facilities. We are developing are in markets, where we have backlogs.
I ask you to constraints or where our current network coverage.
Access for certain patient populations.
Another one of our significant initiatives and expansion through hospital and health system Joint ventures in the past we have stayed in that.
See a path forward towards holding as much as 50% of our imaging centers.
And these partnerships.
With two recent JV expansions, which I will discuss shortly we now have 119 of our facilities within health system partnerships, a roughly 33% over an entire network of centers.
Most hospitals have been challenged by the loss of patient volumes to outpatient freestanding facilities, who offer significantly lower pricing along and <unk>.
Along with better and more convenient patient experience.
Many of these health systems recognize that creating a partnership with an outpatient operator like radnet gives them an opportunity to participate in recapturing revenue that they have otherwise already lost or will likely lose in the future.
Recently, we announced that our joint venture with our WJ Barnabas health in New Jersey imaging network.
The outpatient radiology outright outpatient radiology assets Montclair radiology.
But more than 75 years, Montclair radiology has been a leading provider of diagnostic imaging and northern New Jersey.
Unclear radiology owns and operates six multi modality centers and performs over 200000 procedures per year. We are projecting that this acquisition will add over $40 million of revenue on an annual basis to N J N and bringing the total number of centers in this joint venture to 30 facility.
<unk>.
In addition, we.
Completing the expansion of our Arizona diagnostic radiology joint venture with dignity health in conjunction with the expansion dignity health contributed three hospital affiliated outpatient imaging centers into the existing outpatient partnership with Radnet.
These locations include one multi modality center into womens imaging facilities and it.
<unk> to these newly contributor locations by year end 2020 to the joint venture will open a 30000 square foot facility called park central in proximity to downtown Phoenix.
With this expansion we now have a platform of 11 centers in the Phoenix area and look forward to executing on future opportunities to expand our capacity and footprint.
I am, particularly pleased to announce that we have initiated initiated a pilot of our new in cancer breast cancer detection.
E D C D service in Delaware.
You're offering works in concert with eight patients annual breast screening regimen.
An additional fee patients can elect to enroll in a suite of premium mammography related services, including the use of detail Sage Dx AI.
Personalized lifetime risk assessment.
And additional AI driven review for certain exams and access to a dedicated 181 800 support line.
<unk> analyzes each mammogram in detail and if suspicious filings are present.
Identifies the lesion in the exam for the radiologist and categorizes the level of suspicion.
Many of our radiologists, who have been using Dx AI.
Indicate that AI is improve their accuracy in detecting breast cancers.
Lord the name we have given to an additional AI driven review for suspicious findings is designed to be effective quality assurance tool unparalleled in our industry.
I believe that the innovated E. BCD program is one of the most important endeavors that company has pursued for our patients currently we perform over one 4 million screening mammograms.
And we anticipate expanding this program to all Radnet markets during the first half of next year.
I invite you to read more about E D C D at.
W. W. W Dot.
E B C D memo dotcom.
We recently announced the acquisition of a controlling interest in heart and lung health, a London based Teleradiology network focused on lung cancer screening.
With a network of over 70 expert cardio thoracic radiologists HLA. She has established itself as the leading provider of lung cancer screening services.
The U K to the U K National Health services targeted.
Lung health check program, which mandates the combined use of AI and expert radiologists interpretation for widespread population health lung cancer screening.
Under this program patients, aged 55 to 74, who have ever smoked at being screen through low dose <unk> for lung cancer and related diseases and in September 2020 to the success of this program pilot originally launched in England Paves the way for the U K.
National screening committee to recommend that population based targeted screening of lung cancer be introduced for high risk patients across all of the nations of the UK.
H L. H utilize the software for Radnet AI subsidiary agents and it is anticipated that the program could drive over 1 million lung scans in England alone.
On an annual basis, when the program becomes fully implemented which is targeted by the end of 2026.
This is red in this first example of combining specialty Teleradiology interpretation interpretation services.
With artificial intelligence algorithms to enable a comprehensive cancer screening program.
We believe these types of screening programs combining specialty radiology interpretation.
Yeah.
Hey, I represent the future of widespread population health screening for a variety of cancers and other chronic diseases.
Lastly, with respect to our growth initiatives, we believe the opportunities for continuing consolidation could accelerate as a result of reimbursement pressures challenged labor markets and rising interest rates.
Low financial leverage less expensive cost of capital and greater liquidity places us in a favorable position to complete accretive acquisitions, which may arise.
Our cash at the end of the third quarter was over $95 million and we are undrawn.
Our $195 million revolving credit facility, our dsos are at a record low of 37 days.
And we are producing a substantial amount of free cash flow.
In most instances our scale and operating expertise provide us unique synergy.
And cost saving opportunities, resulting from local market consolidation.
While we are committed to growing and expanding our business through all of the growth initiatives I have reviewed. This morning. We will also continue to follow a methodical and disciplined approach to managing our financial leverage.
At this time I'd like to turn the call back over to Mark to discuss some of the highlights of our third quarter 2022 performance.
When he is finished I will make some closing remarks.
Okay.
Thank you Howard.
I'm now going to briefly review, our third quarter 2022 performance and attempt to highlight what I believe to be some material items.
I will also give some further explanation of certain items in our financial statements as well as provide some insights into some of the metrics that drove our third quarter performance.
I will also provide an update to 2022 financial guidance levels, which were released in conjunction with our 2021 year end results in March and which we amended in May and August upon releasing our first and second quarter financial results.
In my discussion I will use the term adjusted EBITDA, which is a non-GAAP financial measure the company defines adjusted EBITDA as earnings before interest taxes, depreciation and amortization and excludes losses or gains on the disposal of equipment other income or loss loss on debt.
Englishman and noncash equity compensation.
Adjusted EBITDA includes equity earnings in unconsolidated operations and subtract allocations of earnings to Noncontrolling interests in subsidiaries and is adjusted for noncash or extraordinary and onetime events taking place during the period.
A full quantitative reconciliation of adjusted EBITDA to net income or loss attributable to Radnet, Inc. Common shareholders is included in our earnings release.
With that said I'd now like to review, our third quarter of 2022 results.
For the third quarter of 2022.
Radnet reported revenue from its imaging centers reporting segment up $349 $1 million and adjusted EBITDA of $50 $2 million.
As compared with last year's third quarter revenue increased $17 million or five 1% and adjusted EBITDA decreased $4 $7 million or eight 5%.
This comparison excludes the one time benefit for the forgiveness of deferred federal payroll taxes in the third quarter of 2021.
Including our AI reporting segment revenue was $350 million in the third quarter of 2022, an increase of five 2% from $332 $7 million in last year's third quarter.
Including the losses of the AI reporting segment adjusted EBITDA was $45 8 million in the third quarter of 2022 and $54 $6 million in the third quarter of 2000 2021.
For the third quarter of 2022, Radnet reported net income of 668000 as compared with $16 $2 million for the third quarter 2021.
Diluted net income per share for the third quarter of 2022 was one cent per share compared with diluted net income per share of <unk> 30 in the third quarter of 2021 based upon a weighted average number of diluted shares outstanding of $57 8 million shares in 2022, and $53 8 million.
<unk> shares in 2021.
There were a number of unusual or onetime items impacting the third quarter, including the following.
$11 $2 million of noncash gain from interest rate swaps net of amortization of the accumulation of the changes in fair value of our out of the other comprehensive income.
$8 $1 million change in estimate related to refund liability.
$195000 of severance paid in connection with headcount reductions related to cost savings initiatives.
$959000 expense related to leases of our de novo facilities under construction that have yet to open their operations at.
$7 $8 million of pre tax losses related to our AI reporting segment.
Adjusting for these items.
Adjusted earnings from the imaging centers reporting segment was $5 3 million and diluted adjusted earnings per share was nine cents during the third quarter of 2022.
Also affecting net income in the third quarter of 2022 were certain noncash expenses.
Unusual items, including the following.
$3 $3 million of noncash employee stock compensation expense, resulting from the vesting of certain options and restricted stock.
$247000 gain on the disposal of certain capital equipment.
$959000 of non operational rent expense associated with I'd opened de novo locations.
At $648000 of noncash amortization deferred financing costs and loan discounts related to financing fees paid as part of our existing credit facilities.
For the third quarter of 2022 as compared with the prior year's third quarter.
MRI volume increased 10, 8%.
<unk> volume increased nine 6% and pet C T volume increased 11, 5%.
Overall volume taking into account routine imaging exams inclusive of X Ray ultrasound mammography and all other exams increased five 7% over the prior year's third quarter third quarter.
On a same center basis, including only those centers, which were part of Radnet for both the third quarters of 2022 and 2021.
MRI volume increased nine 2%.
<unk> volume increased 6%.
At Pepsi tea volume increased nine 5%.
Overall same center volume taking into account all routine imaging exams increased three 9% over the prior year same quarter.
In the third quarter of 2022, we performed 2 million 311448 total procedures.
The procedures were consistent with our multi modality approach whereby 75, 4% of all the work we did by volume was from routine imaging.
Our procedures in the third quarter of 2022, whereas follows.
348912, mris as compared with 314870 mris in the third quarter of 2021.
207554, Cts as compared with 189 and 444 Cts in the third quarter of 2021.
12932, pet Cts as compared with 11600 pet Cts in the third quarter of 2021.
And $1 million 742050 routine imaging exams as compared with $1 million 670042 of all these exams in the third quarter of 2021.
Overall GAAP interest expense for the third quarter of 2022 was $12 $4 million. This compares with GAAP interest expense in the third quarter of 2021 of $12 million.
Cash paid for interest during the quarter, which excludes noncash deferred financing expense accrued interest in payments to swap Counterparties was $10 6 million.
With.
So our balance sheet at September 32022, unadjusted for bond and term loan discounts, we had $662 $9 million of net debt, which is our total debt at par value less our cash balance.
Note that this debt balance includes new Jersey imaging network at a $42 million for which Radnet is neither a borrower nor guarantor.
As of September 32022, we were undrawn on our $195 million revolving line of credit.
And had a cash balance of $95 million.
At September 32022, our accounts receivable balance was $172 $5 million, an increase of $37 $4 million from year end 2021.
Our days sales outstanding or DSO was 37 days at September 32020 to the lowest level in our company's history.
Through September 32022, we had total capital expenditures net of Aspen asset dispositions.
Of $92 million.
This excludes $3 $6 million of capital expenditures at our New Jersey imaging network joint venture.
At this time I'd like to update and revise our 2022 financial guidance levels, which we released in conjunction with our fourth quarter and year end 2021 results and amended after reporting our first and second quarter.
Quarter 2022 financial results.
For revenue from imaging centers, our guidance is unchanged at 1 billion 360 to $1 1 billion 410.
Million.
A million dollars excuse me $1 billion.
For adjusted EBITDA.
Are we revised our guidance range to $203 million to $208 million.
For capital expenditures, we increased our guidance ranges to $100 million to $105 million.
For cash interest expense, we increased our range to $35 million to $40 million and for free cash flow generation, we decreased our guidance range to $60 million to $70 million.
We're adjusting our guidance levels to reflect the challenges than an extremely difficult labor market had on our third quarter results, which Dr. Berger highlighted in his prepared remarks that you reflect the anticipated performance for the remainder of 2022.
We are executing on a multitude of growth and cost savings initiatives that makes us very often optimistic and excited about how we're positioned for the upcoming fourth quarter of 'twenty, two and the full year of 2023.
I'll now take a few minutes to give you an update on 2023 reimbursement and discuss what we know with regards 2023 anticipated Medicare rates.
As a reminder, Medicare represents 22, 3% of our business mix.
With respect to Medicare reimbursement in July we received a matrix of proposed rates by CPT code, which is typically part of the physician fee schedule proposal that are at that is released about that time every year.
We completed an initial analysis at the time and compared those rates to 2022 rates.
We volume weighted our analysis using expected 2023 procedure volumes.
As you May recall, two years ago CMS move forward with increased reimbursement for evaluation and management CPT codes, which favor certain physician specialties that regularly bill for these services, particularly primary care doctors.
CMS proposed doing so with budget neutrality, meaning that it proposed to reallocate reimbursement from physicians, who rarely bill for E and M codes to physicians, who regularly bill for these codes.
As a result, radiology and most other specialties experienced cuts in reimbursement during 2021, and 2022 cuts meant to be phased in over several year period.
The cuts we faced in 2022 were substantially mitigated by a 3% increase to the conversion factor from legislation that was passed at the end of last year as part of the protecting Medicare at American farmers from sequestration cuts Act.
In this year's proposed rule governing 2023 reimbursement Medicare appeared to effectively proposed phasing in the remainder of the N M code related cut avoided last year.
The cut proposed for 2023 results from a decrease in the conversion factor in the Medicare fee schedule by about four 4% along with certain minor changes to the RV use of relative value in units of certain radiology CPT codes.
The majority share of this proposed cut came.
Came from the exploration of the one year, 3% increase to the conversion factor during 2022 provided by the congressional legislation last year.
Our initial analysis.
The final rule.
The initial excuse me of the proposed rule in July .
Was that right.
And Radnet is roughly $1 $4 billion in revenue that we would face an approximately 8 million to $10 million revenue hit in 2023 from our Medicare business.
A few weeks ago CMS released its final rule, which was essentially in line with its proposal from July with a proposed four 5% decrease to the Medicare conversion factor.
Because of the decrease in the conversion factor affects all physicians not just radiologists there.
There are many lobbying groups from various medical specialties aggressively opposing the cut including radiology has two main lobbying forces the association for quality imaging or <unk> and the American College of Radiology ACR.
Furthermore, many believe that the protecting Medicare and American farmers from sequestration cut Act increase will be extended from 2022 through 2023 mitigating the majority of the conversion factor decline as currently scheduled.
We would expect for this to happen towards the end of this year like it did last year.
In fact in September .
U S Representatives Army bear a Democrat from California, and Larry be Shine is a Republican from Indiana introduced bipartisan legislation similar to the bill introduced by them last year, which was successful and substantially mitigating at similar proposed cut to the 2020 to Medicare.
Conversion factor.
The supporting Medicare providers Act of 2020 to bear and be shines nubile would ensure payments to Medicare providers are kept stable and extend certainly increases in payments for physician services under the Medicare program through 2023.
At this time, our policy experts and lobbyists believe there is a very high probability that the cut scheduled to go into effect next year will be fully or partially mitigated by congressional action with this bill in December .
I'd now like to turn the call back to Dr. Berger, who will make some closing remarks.
Thank you Mark.
Like some of the challenges in the overall operating and economic environment that we discussed earlier on today's call I am very enthusiastic about the coming quarters.
Next year for Radnet.
As the largest most sophisticated and best capitalized operator in our industry, we are well positioned regardless of what the greater economic or industry specific conditions are like.
And as indispensable to the healthcare delivery system in our regional markets.
Scale and breadth of capabilities as well as our relationships with referring physicians patients health systems, and cafeteria partners create a significant advantage over our other competitors.
Vantage is positioning us to capitalize on opportunities that could arise.
Typically in difficult times weaker imaging operators become eager and attractive acquisition candidates and long term value, creating consolidation can be aggressively pursued.
In the coming quarters, we will continue to execute on a multitude of initiatives that I discussed in my earlier remarks. These include opening the de Novo centers, we have in development.
Yeah.
Okay.
Sorry, I lost the connection here for a moment, expanding our hospital and health system joint venture businesses.
<unk> with our enhanced scale.
Cancer detection offering to all Radnet markets accelerating the commercialization of our AI portfolio and Opportunistically pursuing accretive acquisitions in our core imaging center business.
These initiatives should drive our growth and efficiency and position us for a very strong 2023.
In conclusion, we are excited and enthusiastic about the opportunities that lie ahead for Radnet and we look forward.
<unk> you.
Further in the coming quarters regarding our progress.
Operator, we are now ready for the question and answer portion of the call.
Thank you if you would like to ask a question you may signal by pressing star one on your telephone keypad.
If you're using a speaker phone. Please make sure your mute function is turned off to allow your signal to reach our equipment.
Once again star one to signal for a question, we'll pause for just a moment.
We will take our first question from Brian <unk> with Jefferies.
Hey, good morning, guys.
I guess, Mark I'll start with you so as I think about it.
As I think about the Q3 results I mean, the revenue line was actually pretty decent.
Despite the challenges during the quarter, but as I think about the cost line I mean, how.
[laughter], how lasting or how sticky are these challenges on the cost side and the installations are obviously, an issue and it sounds like you're gaining some traction on the recruitment front, but just curious your.
Your thoughts in the lasting effects of the Heartland.
Sure.
Yeah, I mean, clearly we were impacted by labor challenges, which are similar to what we're seeing in almost every industry, particularly in health care and it impacted both.
It impacted radnet, both on our revenue side as well as the cost side, because we had we had staffing issues.
Where we had to pay substantially.
Yes.
Our overtime was substantially higher than normal we use temporary service.
In other cases, we couldnt staff rooms, and so we had to cancel appointments reschedule appointments, if if we could and so we lost both revenue and our costs were higher during the quarter.
We have seen some recent improvement that gives us significant amount of confidence moving into the fourth quarter and into the next year on the staffing side as we said in our prepared remarks are.
Our open positions peaked in September at about 850 open positions and as of yesterday. The report that came out of HR is that our open positions are down to about 262 employees. So we're doing a lot better on the talent acquisition front I think.
One we've refined some of the systems. We've added more recruiters I think in general the market has gotten a little bit more favorable for companies looking to hire we have noted that there were some.
Hospitals and health systems in our markets that started doing layoffs Kaiser made some layoffs here in California Adventist health.
<unk> also announced some layoffs. So I think we are capitalizing on.
A labor market that has certainly stabilized and what we're seeing is improving going into the fourth quarter. We also have seen that impact not only our cost as we move into the fourth quarter, but our revenue.
We had the strongest revenue in October .
Uh huh.
The strongest month all year in October and we're seeing.
Very similar per day revenue as we've moved to early on here in November which gives us tremendous confidence that November is also going to be a strong. One. So we have a lot of reason to be optimistic and not to mention all of the initiatives that Dr. Berger went through.
In his prepared remarks about what should drive incremental revenue and profitability as we move into 2023.
Hey, Mark I was just wondering.
Yes.
Ryan.
Hey, Brad Yeah, let me just amplify on that a little bit.
I think that the increased labor cost once we.
Fully staffed up.
Are here to stay.
We're building that in anticipation of our 2023 performance.
There are other things that we can do and have been doing here throughout 2022 to help reduce the dependency that we have.
Technological capabilities, there are investments that we're making in equipment.
To improve throughput into our centers that will help drive revenue without further increasing our costs.
As well as other initiatives, we're taking in contracting with payers.
<unk>.
As well as.
Expansion that we think will add substantially to our performance not only in 2023, but also here in 2020 twos fourth quarter. So.
We're anticipating I think is where you were going Ryan that higher labor costs are going to be here to stay not just for radnet in health care, but throughout other industries.
The company is making the appropriate adjustments to.
Ultimately maintain and hopefully grow our margins.
I guess, Howard or Mark I'll follow up on that.
Alluded to kind of heading into 2023.
Qualitatively any moving pieces that we should be thinking about as we said.
Think about 'twenty three and then just maybe some views on your ability to drive positive EBITDA growth next year.
Yes, Brian I think there are initiatives as I think I outline.
Outlined many of them, but we are working on expanding almost every one of the hospital partner relationships that we have to either add more facilities or improve.
The actual performance.
I think that we will.
Drive revenue with a substantially with the 15, new centers that we're developing the majority of which will be.
Operational by the.
First at the end of the first half of this year.
Our average center generates about $4 million or so residents. So 15, new centers ultimately will drive the.
We hope about $60 million of new revenue some of which we've already started experiencing but only recently in the latter part of the.
Second quarter and into the third quarter, so far this year.
I think we should pay particular attention to the new initiatives that I outlined also.
Come in the form of artificial intelligence.
Very excited about our.
Enhanced breast cancer detection program, which we think will have.
An enormous impact on improving the.
Detection of cancer earlier and better outcomes.
For our patients and we will be the standard by which.
Screening mammography and breast cancer.
We will be performed.
So I think that that will contribute significantly in the next year as I mentioned, we do $1 4 million screening mammograms a year.
And that number.
We'll be growing.
In addition, some of the benefits that we will get by the increasing.
Labor.
Positions that were filled.
Well not labor physicians staffing positions that were feeling should decrease our cost of overtime as well as.
Reduce it and hopefully substantially eliminate.
Temporary staffing agency so.
I think we're looking at.
<unk> opportunity to improve our margins next year.
That will come both from revenue as well as a better control of costs.
Higher higher wages are here to stay that's for sure.
Right.
I guess, mark shifting gears I guess for Howard <unk>.
It sounds like a really interesting program anything you can share with us in terms of greater detail on how it works and where you see the opportunity there.
Sure Brian .
The pilot program that we rolled out last week.
Delaware is meeting with a very enthusiastic reception.
Our patients are.
We are using a lot of collateral both in terms of our website.
<unk>.
Handouts that we'd give patients.
To educate them as to what the value.
This service will be.
Where we're charging $59 for this which we believe is a.
Very attractive price point.
And so far in our centers.
Yeah, I think between 30% and 40% of patients enrolled for this new service. So we expect those numbers to increase significantly.
And we're further buoyed by a report that came out of the United Kingdom.
British Journal Radiology, which are indicated in the survey they did.
Women are 88% of them were attracted and are encouraged by the use of artificial intelligence for breast imaging. So.
We believe this is a.
Substantial opportunity not only for radnet, but really the industry as a whole to get a better handle on managing breast cancer, which one out of every eight women will sell.
Suffer from at some time in their life then there are these technological tools.
To be more accurate and earlier cancer detection.
Could have far reaching implications for.
For Radnet.
And.
Radiology imaging radiology and imaging industry as a whole.
I appreciate that and then our last question for me if I may there is a lot of discussion about.
Binders drugs.
Coming up for approval.
And obviously imaging there will be a key part of that discussion just curious how you're thinking about that opportunity and how you're preparing for that potential.
If it gets approved.
Well.
We've already been doing a fair number of.
These studies.
As part of our research relationships so.
We think these are good tools.
I think as they get adopted through reimbursement.
It can have a substantial impact.
On our revenue, but it's one of many initiatives that we have for <unk>.
The value, adding new procedures.
It will help better define treatment pathways are another one we're working on is P. MSA for <unk>.
Prostate cancer metastasis.
Which we do more than any other.
Imaging operator in the country, and which has gained an enormous amount of acceptance. So.
Yes. This is adopted which we all believe it will all of these patients will need regular mr's to determine both the extent of the.
Potential alzheimer disease, initially as well as the effectiveness of treatment given that there are some side effects of these drugs yet.
To be carefully monitored so I do believe that.
Particularly with the.
Hi.
The strategy that Radnet offers of being in densely populated markets.
That could be a future large driver of business for us and we stand ready to do that as I said.
We've been doing many already as a part of these.
These drug research programs.
Awesome. Thank you.
Thank you Brian .
As a reminder, star one if you would like to ask a question.
We will take our next question from Mitra <unk> with Sidoti <unk> Company.
Yes. Good morning, Thanks for taking our questions Howard just curious your thoughts.
As we head into a likely recession next year.
How resilient is the business, especially on the volume side.
It's a structure today in the markets you're in.
Hi Mitra.
Well generally speaking.
Health care has been relatively.
Insulated from recessionary factors in it.
Some people say during recession.
People need more health care because they.
They don't take care of themselves as well as they might even better times, but besides that.
There is a.
As I talked about in my prepared remarks, there is already what we are seeing is a substantial effort on the part of PE or is to drive more of the outpatient businesses away from hospitals and we expect.
That to continue so I think both because of aging population increasing population.
And screening tools that are uniquely done in outpatient facilities more so than in hospitals.
Better pricing all point to a.
Rather optimistic.
Sure our volumes in 2023, I think that a lot of these efforts to move the business away from hospitals have finally taken root here as.
<unk> has become more aggressive about doing this and as you've seen almost all the pay ores.
As well as other.
A new entrance into health care delivery primary health care like Walgreens and <unk>.
<unk> even Walmart.
We will be.
Involved in.
Bringing health care more to where people live and where they may shop and <unk>.
And more time, and we expect to be a part of that program and we'll probably have more information on that.
Next.
Close call for the fourth quarter, So I don't think volume for Us Mitra.
As a concern.
Think handling that volume and improving our margins and keeping our cros.
Troll after the experience.
We had.
In 2022 and from which we learned.
An awful lot about how to even better manage the operations.
<unk> be a substantial benefit for us in 2023.
Okay. Thanks for that.
And on the expansion.
In Arizona, if I remember.
It was off to a slower start than you might have anticipated, but it would appear.
Just on the expansion.
You are pretty comfortable.
With that market and the growth opportunities there now.
Definitely we hope to have some more announcements about further efforts to expand.
I reach in now.
Not only.
The Phoenix area, but in other relationships that we have with them.
The dignity health system.
Side of Arizona and in other markets also so.
We certainly have benefited already from establishing a strong relationship with the dignity health system, which.
While it took longer than we wanted.
We'll be one of our major joint venture partners here for the future.
Okay. Thanks, Andy if you can help us in terms of as you look at the growth opportunities. How are you sort of prioritize at what it's a JV with a de novo betterment in AI.
And he.
Since the terms of the importance of that.
Those opportunities for you.
Well I think they're all.
Very good opportunities for us perhaps.
You focus on or at least keep your eye on is that.
The.
Recent announcement that we made into acquiring a majority position for the UK based Heartland health.
Program could be as a template for future expansion on the Tullow radiology side, one of the ways that.
Radiology in particular is going to need to change is further recognition of the fact that the.
The labor shortages that we've talked about is not only with the non professional side of our industry, but also on the professional side of it and there are too few.
Radiologist in fellowship programs that are coming out into the marketplace and jobs currently being offered.
The increasing demand for these services are going to necessitate changes in the way that the delivery of the professional component is delivered.
I think for Radnet in particular, and this represents a great opportunity for us too.
Not only with the Kern.
State that we've made in teleradiology, but get deeper into specialty teleradiology really networks, which will enhance our.
Which will enhance our.
Opportunity to combine this with artificial intelligence and create superior.
It comes with it.
Also in general address some of the shortages that we and everybody else is experiencing.
Taking our large base of radiologist.
Creating our own.
Teleradiology initiatives here so.
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I don't know if I could put any of the things that I've mentioned it in my prepared remarks as a greater priority. They are all priorities and they are all incredibly.
Incredibly exciting opportunities for us to pursue so.
Radnet is in the process of not being just.
Outpatient imaging center, but really leading radiology, even further into the future by using technology to drive opportunities both on the revenue side and on the controlling.
Controlling on the expense side.
I'm sure we're going to have more to talk about this as we get deeper.
Into 2023.
Okay. Thanks, and then finally.
Just following up on that a little.
Looking I think looking ahead I think you mentioned the higher costs are here to stay on the labor front. So.
So I was just wondering if that might give you some pause as you look to expand.
De Novo.
Strategy and even.
Adding more imaging centers at this point.
I don't think it will.
Slow us down from doing that because the demand is there and as I mentioned in our de Novo remarks.
My remarks about the novel centers a lot of these are too.
Increased capacity for demand that we already have.
I think part of the.
The experience and challenges that we have with our labor costs are things that we're talking to the payers and others.
The need for better reimbursement so while that's always been an effort on the part of the company to improve reimbursement.
Thank you.
Is even a greater opportunity for us to have these conversations.
I mentioned.
We're just in it.
And incredibly essential part of health care delivery in all of our markets and it's incumbent upon.
Everybody that needs our services to understand that these kind of increase closer.
It has to be borne by the payers as well as others in that.
To keep Radnet.
Being the contributor it is and the importance that it is.
Everybody has to take that into consideration so.
We have very receptive groups out there.
Although these don.
Culminate in overnight.
We're having very good success, along those lines in terms of trying to offset it and keep our margins higher by improved reimbursement from.
All of our.
Payer contracts.
Okay. Thanks, again for taking the questions.
Thank you Mitra take care.
Thanks Mitra.
With no additional questions in queue I'd like to turn the call back over to our speakers for any additional or closing remarks.
Okay.
Thank you operator.
I would like again to take this opportunity to thank all of our shareholders for their continued support and the employers of Radnet.
Please I'm, sorry, ultra aetna and the employers for that matter.
Your dedication and hard work management will continue its endeavor to be a market leader that provides great services with an appropriate return on investment for all stakeholders. Thank.
Thank you for your time today and I look forward to speaking with you on our next call.
That will conclude today's call. We appreciate your participation.
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Okay.
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Yeah.
Yeah.